Fiat Chrysler said to be poised to settle U.S. criminal, civil litigation over diesel emissions

WASHINGTON -- Fiat Chrysler Automobiles is nearing a settlement with the U.S. Justice Department that would end a two-year criminal investigation into whether it knowingly sold diesel vehicles that violated clean-air rules, two people familiar with the matter told Bloomberg.

The resolution would include a financial penalty in line with Fiat Chrysler’s guidance to investors, one of the people said. The company is also getting closer to settling related civil litigation over diesel-rigging allegations, a third person said. Fiat Chrysler set aside $810 million in October for expenses related to all diesel probes.

A settlement of the civil litigation could be announced as early as this week, Reuters reported earlier on Tuesday.

The criminal settlement could be announced as soon as this month, two people who shared details of the confidential talks on the condition of anonymity told Bloomberg. The company would be required to admit wrongdoing, one of the people said. Details of the resolution are still being finalized and could change.

Prosecutors are using a similar fraud case against Volkswagen Group as a template for the Fiat Chrysler settlement that is still being finalized, one of the people said. Among the terms, Fiat Chrysler would be required to hire an independent monitor to oversee the automaker’s compliance programs, the person said.

The Justice Department is still considering whether to bring criminal charges against individuals, the other person said. The U.S. charged eight people in the Volkswagen case, including former CEO Martin Winterkorn.

Fiat Chrysler said it would not comment on speculation. The company has denied intentional wrongdoing. The Justice Department declined to comment.

The criminal matter is part of a multi-agency investigation into the sale of diesel-engine vehicles that the government alleges were equipped with software that masked the true carbon emissions of the cars in lab tests.

The EPA and California Air Resources Board in January 2017 alleged Fiat Chrysler sold 104,000 diesel-powered SUVs and pickups that violated U.S. emissions regulations. The regulators said 3.0-liter diesel engines used on some Jeep Grand Cherokee and Ram 1500 models contained pollution-control software that violated emissions rules.

In May 2017, a few months after prosecutors opened a criminal investigation, the Justice Department filed a civil case against Fiat Chrysler alleging violations of the Clean Air Act.

Comparisons with VW

Volkswagen admitted in 2015 that it rigged some 11 million vehicles worldwide to pass emissions tests, sending shock waves through the industry and costing the German carmaker about $30 billion in fines, settlements and other costs.

Volkswagen pleaded guilty in Detroit in 2017 to conspiring to defraud regulators, obstruction of justice and making false statements. The scandal has hurt demand for diesel cars and put other manufacturers under a cloud of suspicion and regulatory scrutiny.

The U.S. investigation of Fiat Chrysler is expected to produce a smaller monetary penalty than the one levied against Volkswagen, in part because the company’s alleged violations involve far fewer vehicles.

In the civil case against Fiat Chrysler, lawyers for the company and the Justice Department agreed last year that any settlement would include a monetary penalty, a plan to recall and repair the 104,000 diesels, and an effort to mitigate the environmental harm caused by the vehicles’ excess pollution, Bloomberg has reported.

Substantial penalties

The settlement “must include very substantial civil penalties” that are large enough to deter future violations and that “adequately reflect the seriousness of the conduct that led to these violations,” Justice Department lawyers wrote in a January 2018 letter to the automaker.

Central to the Volkswagen case were the criminal charges against individuals accused of setting up and executing the rigging scheme. Most of those charged, including Winterkorn, remain in Germany, which will not extradite its citizens.

In the Fiat Chrysler case, some of the individuals under scrutiny reside in the U.S., one of the people said.